“How did you come up with that amount for my (or my client’s) claim?” I was thinking of that question while taking the deposition of an Allstate corporate representative in an Indiana claims practice case, and how an insurance adjuster should honestly answer it. It is the same question millions of other policyholders, public adjusters, and attorneys ask insurance company representatives every day.

Could you imagine what would happen if a wife asked her husband, “Honey, where were you,” and one of two answers were given:

  1. “I am not going to tell you where I was because there is no law or regulation that says I have to tell you.”
  2. “I stopped by the Alibi Lounge to have a drink with the guys.” Which may have been true, but only after also seeing “my girlfriend” for an hour outside the lounge.

You can imagine the response. Do insurance company managers understand how their policyholder customers feel with an analogous answer? Yet, it is commonplace.

Even when corporate and commercial policyholders ask if the property insurance adjuster or the insurance counsel can provide drafts of reports or whether they are editing drafts of an alleged expert engineer, the questions are unanswered. Many insurers refuse to answer claiming such information is “work product.” Many send the “last” draft which is allegedly the most accurate. It is amazing how often the last draft lowers claims payments.

There are claims managers that mandate full transparency of issues and questions. One State Farm senior claims manager even said that his company has an obligation to provide all drafts to policyholders. This type of transparency in the claims process should be applauded, even if it eventually ends up in a dispute. Honest and good faith differences of opinion can occur. Why not be honest about those?

Even in Great Britain, I notice that policyholders perceive that the claims process is “gamed” against policyholders. While trying to put myself to sleep last night, I read a book from the Oxford University Press, “Policies and Perceptions of Insurance Law in the Twenty-First Century,” M. Clarke (Oxford Univ. Press 2007), that verified people in England have the same perceptions regarding an insurer’s honest reasons for claims decisions:

“First, it has been doubted whether adjusters come to claims with an open mind. Secondly, why, when the adjuster’s investigation is complete, is the report drawn up by the ‘independent’ adjuster available to the insurer but not to the claimant? The answer is that, in reality and in law, adjusters are the agents of the insurer. The perception of many claimants, who view adjusters with resentment and distrust, is that adjusters are brought in only to beat the claim down.”

I can imagine that my policyholder friends in Texas, Mississippi, and Florida can take some refuge in the fact that other legal systems, even one much older than ours, are battling the same problems.

  • Insurance Veteran

    Interesting that you make no distinction between staff and independent adjusters. Staff adjusters like those at Allstate and State Farm tow the corporate line as employees. Independent adjusters readily make available their estimates; however, the carriers for whom they work have different approaches to the situation. Most want to approve what is going to be sent to the insurer however the original never disappears or is claimed as work product. If requested to change an estimate, the good independent will note those change requests in their report.

    Independents provide a fair, unbiased report of incident related damages. The carrier sometimes has a differing opinion for a multitude of reasons. I agree there needs to be more transparency in the process, but please do not lump all adjusters in to the same basket.

  • Well, misery does love company, Chip, but for the life of me I don’t understand the lack of transparency in an industry that demands so much information about its policyholders.

    You would think the insurance industry would want to set the standard for integrity.

  • As usual, great point Chip. I helped write and pass a law in California that allows claimants to obtain claim related documents during the adjustment process. We tried to get a similar law passed in Louisiana after Katrina – and I’ve been thinking this would be a good concept to work on exporting nationwide. Here’s the wording of the CA. Insurance Code section on point:

    The insurer shall notify every claimant that they may obtain, upon request, copies of claim-related documents. For purposes of this section, “claim-related documents” means all documents that relate to the evaluation of damages, including, but not limited to, repair and
    replacement estimates and bids, appraisals, scopes of loss, drawings, plans, reports, third-party findings on the amount of loss, covered damages, and cost of repairs, and all other valuation, measurement, and loss adjustment calculations of the amount of loss, covered damage, and cost of repairs. However, attorney work product
    and attorney-client privileged documents, and documents that indicate fraud by the insured or that contain medically privileged information, are excluded from the documents an insurer is required to provide pursuant to this section to a claimant. Within 15 calendar days after receiving a request from an insured for claim-related documents, the insurer shall provide the insured with copies of all claim-related documents, except those excluded by this section. Nothing in this section shall be construed to affect existing litigation discovery rights.

  • Chip Merlin

    Insurance Veteran,

    I need to start using the words–“some, most, and many” so I do not implicate everybody of doing something wrong or right.

    I appreciate your rcomments and point, although I do not agree with them all.

    All adjusters do not operate in the manner I mentioned. Many professional claims adjusters, independent and company, do not tolerate this type of treatment to policyholders. The insurance industry needs more of these adjusters and claims managers that take this ethical stance.

    However, many adjusters tolerate this bad behavior and even do it as a general business practice.

    I have found some insurance company counsel re-writing entire reports so they dovetail with policy language providing less coverage. The wording originally drafted by the insurance company expert or vendor is not nearly as strong as what gets written by the attorney. This often is discovered in email or other electronic discovery in claims practice cases.

    And sometimes, the people doing these bad things are independent adjusters. “Independent” does not usually mean “free from influence” when it applies to the insurance world where longstanding relationships sometimes result in the “independent adjuster” doing whatever is needed by the client insurance company claims manager.

    However, I have found a number of independent adjusters that simply will not go along with such gamesmanship. You are correct in my experience that those adjusters that simply do not put up with this are often the independent adjusters.

  • shirley heflin

    Chip, I can’t sleep and I’m hoping this Blog will make me tired–JUST KIDDING!

    Turning to your answer to “Ins. Veteran” that there are

    “…independent adjusters that simply will not go along with such gamesmanship. You are correct in my experience that those adjusters that simply do not put up with this are often the independent adjusters.”

    I just wanna say that it’s ashamed, but true, that these type of “independent adjusters” are probably in the MINORITY, instead of the MAJORITY where they belong.


  • Insurance Veteran

    When you understand the quality of adjuster that evolves from a state where you only need to take a three day course which consists of learning the exam answers, you understand why adjusters sometimes tow the corporate line. If the educational and training standards were more rigorous then maybe the quality of the adjuster would be higher. Licensing in certain states is a joke.

    Requiring courses like the CPCU or even a college degree in insurance, like some countries do, would greatly enhance the adjusting community and ensure better claims handling procedures. Of course that will never negate the “change your report or we won’t pay your fee” attitude of some insurance carriers.

  • shirley heflin

    I agree w/you, Insurance Veteran. Having been a Legal Secretary for over 20 years, I’ve seen – it seems like – THOUSANDS of Adjusters – Public Adjusters, Insurance Company (i.e., “defense”) Adjusters, Independent Adjusters, etc.

    I’ve worked w/rude adjusters, nice adjusters, but, more to the point, I’ve seen alot of INCOMPETENT “adjusters.” It seems like 5% of it is one getting their license, and the other 95% is devoted to getting claims which is usually by luck and/or referral.

    As you say, making the licensing requirements more stringent will, no doubt, help the entire insurnce industry – including the little ole’ policyholder.

    Heck, my Real Estate course was 6 months long – we met twice a week. The exam was brutal. I do recall how tough it was “getting in” the Real Estate Business and how easy it seems to be an adjuster.


  • CL

    I am not using my name for certain reasons

    Let me State that I did the audit of Citizens for the State Financial Services. This was based on accusations (mostly from public adjusters).

    Citizens has, of mid 2008, gone from using multiple outside adjusting firms to a more control of claims from experienced adjusting staff. It’s now a remarkable claims setup for the next time a hurricane hits your state. It’s a model that I wish all costal states would adopt.

    You should take the time to see how call centers staff up across the country, Contracts are maintained with over 5000 certified adjusters, massive generators attached to 4 wheel drive trucks and portable claim centers to get ER “checks” out to policyholders, etc .

    To place this in perspective, let assume you walk into your office and 70,000 people show up wanting “satisfaction” in 2 to 3 days. Further, most have no power, no phones, etc… if 1% of those people are not satisfied with your handling, that is 700 complaints filed against you. I never saw a complaint from a paid claim.

    That being said, I recommended that you either remove the Arbitration Clause language OR move the appraisal process under the jurisdiction of the Florida Bar to set up standards and oversight. (I have a plaintiff law practice with my wife in another state)

    Almost 99% of the claims were paid reasonably and timely. There is a high deduct under the policy. A lot of the policyholder’s attempted to inflate their claims to cover…

    As far as the arbitration, I pointed out a $22 million arbitration finding against Citizen’s on a high rise condo that “blew apart” in some penthouses where the DryVit exterior was applied to back of the interior sheetrock wall, where 2 different expert firms (one construction and one architectural) submitted structural metal welding, construction defects and leakage rigging and sever long term rust problems, etc. The PA wanted the condo stripped and rebuilt to code for $22 million. Citizens had guarantee bids to repair to code for $5 million. Arbitrator (also a PA) found in 4 hours of inspection, that the PA (without any expert or technical back up other than a video of him using pressure washer along a window seal to show leaking on inside – replace 3000 window units) was correct and awarded $22 million…

    It is reasons like this why the language is being changed. Remember, every citizen of FL has a vested interest in seeing that Citizens remains solvent. Google public adjuster fraud and arrest, Florida and see what has happened. I learned years ago, not to judge a company by the complaints of a few.

    Best of luck and stay dry.